Treasury

Public Service Pensions – Cost Control Mechanism and the Reformed Scheme Only Design

John Glen: The Government has today published a policy statement on the cost control mechanism (CCM) in public service pensions titled ‘Public Service Pensions – the Cost Control Mechanism and the Reformed Scheme Only Design.’Following recommendations from the Independent Public Service Pensions Commission (IPSPC) in 2011, the CCM was introduced into the valuation process for the reformed public service pension schemes in the Public Service Pensions Act 2013 following consultation with member representatives. It was designed to ensure a fair balance of risk regarding the cost of providing defined benefit (DB) public service pensions between members and the taxpayer. If, when the CCM is tested, scheme costs have increased or decreased by more than a specified percentage of pensionable pay compared to a target cost, then member benefits (and/or member contributions) in the relevant scheme are adjusted to bring costs back to target.Following a review by the Government Actuary and a full public consultation process, the Government confirmed in October 2021 that it would implement 3 reforms to the CCM in time for the 2020 valuations:Reformed scheme only design;Wider 3% cost corridor; andEconomic check.The policy statement published today provides further details on how the reformed scheme only design will operate from the 2020 valuations onwards, in particular with regard to those pension scheme members in scope of the remedy for the McCloud litigation.“Reformed schemes” in this context mean the public service pension schemes introduced as part of reforms following the IPSPC Review, from 2015 for most public service pension schemes and from 2014 for the Local Government Pension Scheme (LGPS) for England & Wales. The reformed scheme only design means that the CCM will only consider past and future service in the reformed schemes, with legacy scheme costs excluded from the mechanism. This will lead to a more stable CCM and ensure consistency between the set of benefits being assessed and the set of benefits potentially being adjusted, thereby ensuring fairness for both taxpayers and scheme members.However, pension scheme members of most schemes in scope of the McCloud remedy will have a choice between benefits in respect of their service from 1 April 2015 and 31 March 2022 to be calculated on the basis of the reformed scheme or the previous, legacy public service pension scheme. The policy statement confirms that all service on or before 31 March 2015 (31 March for the Local Government Pension Scheme in England and Wales) will be excluded from the CCM as this service is exclusively in the legacy schemes. All service from 1 April 2022 onwards will be included in the CCM, as this service will be exclusively in the reformed schemes. In particular, the statement provides details of how service during the McCloud remedy period - 1 April 2015 – 31 March 2022 for most schemes - will be treated under the reformed scheme only design and concludes that McCloud remedy costs will not have a material impact on the CCM from the 2020 valuations onwards.The full policy statement can be found at: https://www.gov.uk/government/publications/public-service-pensions-cost-control-mechanism-and-the-reformed-scheme-only-designA copy has been placed in the Libraries of the House.

Department for Business and Trade

Switzerland Trade Negotiations Update: Launch of Negotiations

Kemi Badenoch: Today, the 15th May the Department for Business and Trade will launch negotiations for an enhanced and upgraded Free Trade Agreement (FTA) with Switzerland, with the first round of negotiations to be held in London this May.In line with the Government’s commitments to transparency and scrutiny, more information on these negotiations will be published and placed in the House Libraries. This will include:The strategic case for an upgraded UK-Switzerland trade agreement.Our objectives for the negotiations.A scoping assessment, providing a preliminary economic assessment of the potential impact of the agreement.A summary of the responses to the call for input on trade with Switzerland held in April 2022. This took views from consumers, businesses, and other interested stakeholders across the UK on their priorities for enhancing our existing trading relationship with Switzerland.Switzerland is already one of the UK’s most important trading partners and a key market for UK businesses of all sizes. Total trade between the UK and Switzerland has quadrupled over the last 20 years to reach £52.8 billion in 2022. Switzerland is the UK’s 10th largest trading partner worldwide and our 2nd largest non-EU (European Union) trading partner in services. Building on our long history of close relations and shared values, an enhanced UK-Switzerland FTA will modernise and improve on our current agreement, signed in February 2019. This is a continuity deal based on a more than 50-year-old agreement between Switzerland and the EU and does not contain any commitments on services, investment or digital trade, despite these accounting for roughly half of our economic relationship.A new agreement presents opportunities to secure long-term certainty on current arrangements and upgrade these to boost bilateral trade and investment. It will benefit crucial UK sectors such as financial and professional services, as well as businesses exporting digitally delivered services. It is also an opportunity to reduce or remove burdensome tariffs and quotas on agricultural goods. In terms of mobility, we will seek to provide long-term certainty, building on the outcomes of the recently extended Services Mobility Agreement. UK and Switzerland’s shared values also provide potential for greater cooperation in areas of mutual interest that trade can support, such as innovative research and development, and on our shared ambitions for tackling climate change. Negotiations provide an opportunity for both sides to defend free trade and showcase the best of European cooperation, demonstrating what two like-minded European nations can achieve outside of the European Union. A comprehensive agreement with Switzerland is a key part of the UK’s strategy to secure advanced modern agreements with new international partners and upgrade existing continuity agreements to better suit the UK economy. It will provide opportunities for businesses big and small across the UK, unlocking trade and investment and opening up new exciting opportunities for growth in all regions. The Government remains clear that any deal with Switzerland will be in the best interests of the British people and the UK economy. We will not compromise on our high environmental and labour protections, public health, animal welfare and food standards, and we will maintain our right to regulate in the public interest. We are also clear that during these negotiations the NHS and the services it provides are not on the table.The Government will continue to keep Parliament updated as negotiations progress, including close engagement with the relevant Parliamentary Committees.

Department for Education

Higher Education Update

Robert Halfon: My Noble Friend the Parliamentary Under Secretary of State for the School System and Student Finance (Baroness Barran) has made the following statement.The Government announced on 13 June 2022 that the student loan interest rate would be set at a maximum of 7.3% between 1 September 2022 and 31 August 2023, in line with the forecast prevailing market rates. The Government confirmed that should the actual prevailing market rate turn out to be lower than forecast, a further cap would be implemented to reduce student loan interest rates accordingly.Reflecting a lower than forecast prevailing market rate across the Academic Year 2023/24, the maximum interest rates for all plan 2 (undergraduate) and plan 3 (postgraduate) loans have been:6.3% between 1 September 2022 to 30 November 2022;6.5% between 1 December 2022 and 28 February 2023; and6.9% between 1 March 2023 and 31 May 2023.I am now announcing a further cap: from 1 June 2023 to 31 August 2023 the maximum interest rate will be 7.1% for all plan 2 and plan 3 loans, reflecting the most recent prevailing market rate. For the first time, this cap will also apply to plan 5 (undergraduate) loans, which become available from 1 August. The temporary cap is a reduction compared to the 7.3% maximum rate announced in June.We will confirm student loan interest rates to apply from 1 September 2023 closer to the time.

Department for Levelling Up, Housing and Communities

Launch of Community Ownership Fund Round 3 Prospectus

Dehenna Davison: Last Friday I announced that the £150 million Community Ownership Fund, which will launch its third bidding round on 31st May 2023, has published a new prospectus detailing positive changes to the eligibility requirements of the programme. The new prospectus can be found on Gov.uk here: https://www.gov.uk/government/publications/community-ownership-fund-prospectus .A summary of the key changes to the eligibility requirements for the relaunch of the Fund include:Increasing the amount of funding all projects can bid for from £250,000 to £1 million;Reducing the match funding requirement; where previously the Community Ownership Fund would contribute up to 50% of total capital funds required, it will now contribute up to 80% of the total capital funds required, with applicants required to raise the other 20% from other sources of funding. Projects in areas of the greatest need will only need to raise 10%; andAllowing parish councils (and their equivalent town and community councils) to apply in the same way that community groups do now.These changes will allow more assets to be saved across the UK and will come in from Round 3 onwards.Coupled with support from the Fund’s development support provider, who will provide assistance with developing project business plans, organisational governance and financial planning, and potential access to small revenue grants to secure specialist support. These measures will help support as many community groups as possible to save their treasured local assets, ensuring that important parts of our social fabric, such as pubs, sports clubs, theatres, and post office buildings, continue to play a central role in towns and villages across the UK. These changes are explained in full in the updated prospectus available on Gov.uk.The Community Fund is already supporting almost 100 projects across the UK such as the Leigh Spinners Mill in Greater Manchester; the Queen’s Ballroom in Blaenau Gwent, Wales; St Columb's Hall in Derry City and Strabane, Northern Ireland; and the UK’s most remote pub, The Old Forge, in the Scottish Highlands. These projects are already making a genuine difference to their communities. I look forward to supporting many more small but mighty local assets across the United Kingdom, levelling up the places we love and cherish.Interested groups can submit an Expression of Interest form to start their application process at any time. The Fund will be running until March 2025, so there is plenty of opportunity for interested groups to apply to take over invaluable community assets and to run them as businesses – by the community, for the community.